The sample comments focus specifically on the impact that "[r]ecent bankruptcies and financial . Please refer to your advisors for specific advice. The "resulting issue" worksheets were given to management to review. the global economy has been affected by a variety of emerging market events, and addition, we expect the number of comments to grow next year because of a rise The SEC continues to prioritize reviews of larger companies, OCIE also will continue to identify and examine SEC-registered firms engaged in the digital asset space, as well as RIAs that provide services to clients through automated investment tools and platforms (often referred to as robo-advisers). This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Change Disclosures. The Division should design and implement formal training for reviewers. The Division has training for new staff examiners and accountants. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Does your firm have procedures and training in place to assess recommendations using a best interest standard? 1 Twitter 2 Facebook 3RSS 4YouTube Sub-elements relating to the comment letter process are distributed throughout the six general categories. Discover how EY insights and services are helping to reframe the future of your industry. Keeping you up to date about SEC staff positions on reporting matters and proposed rulemaking that will affect registrants. 5 The Commission is generally implementing the supporting objective. This box/component contains JavaScript that is needed on this page. Composite management and staff ratings for actual achievement of the supporting objectives were reasonably aligned. These responses were generally consistent with responses from other issuer contacts the Division discussed with us. 2019 - 2023 PwC. Lack of flexibility in work hours concerned some staff. They also felt that the training manual was improved. As part of this work, the SEC has been sending comment letters to public companies relating to their current climate change-related disclosure, including to companies that do not operate in energy-intensive industries. They felt that, in certain cases, Internet e-mail could possibly be a faster way to contact issuers. In each episode of our What's trending in SEC comments series, our guests bring you the latest themes in comment letters from the SEC's Division of Corporation Finance for the most common topical . In this webcast, KPMG professionals discuss recent themes and trends in comment letter activity from the SEC and what areas of focus may be on the horizon. result in increased focus and scrutiny from the SEC staff. A brief statement that precedes the sample comment letter reiterates the view expressed in the SEC's 2010 interpretive guidance that a variety of existing SEC disclosure rules may . Such comment letters are along the lines of an illustrative comment letter released by the Securities and Exchange Commission's (SEC) Division of Corporation Finance (Division) in September 2021 . The Division should develop a guide for reviewers to use in reviewing examination reports. EY helps clients create long-term value for all stakeholders. Another letter signed by over five hundred investors, foundations, companies, lawmakers, and NGOs, expresses support for SEC rulemaking by noting that "climate change poses a variety of material risks to companies of all sizes in all industries across our nation.". Generally, this task is delegated to senior accountants and examiners. Fullwidth SCC. The letters all request that . the SECs Division of Corporation Finance (the Division) continues to selectively A possible approach is to link staff performance evaluations more to the outcomes of filing reviews and impacts on the achievement of the Division's objective (improve disclosure to investors) and depend less on output measures. EY is a global leader in assurance, consulting, strategy and transactions, and tax services. Pertains to 12-month periods ended July 31 Separately, we also reviewed feedback from issuers on the process and analyzed information on comment letters and filing processing to determine conformance to Division procedures and timeliness goals. The Office selected staff to participate in the workshops based on criteria developed by the Office (e.g., must have been on staff at least six months). Thursday, May 5, 2022. In particular, examinations of registered investment advisers (RIAs) will focus on RIAs that have never been examined. Initially, the issuer communicates with the staff accountant and examiner. The table below summarizes comment letter trends by topic in the 12-month period ended July 31, 2022 (review year 2022 or the current year). After each workshop, the auditors typed the summary successes, obstacles, and recommendations from the flipcharts to a formatted word-processing document (one page per objective). Proquest LLC. You can create keywords and key phrases to flag the risk of advisors using unauthorized communication channels. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Are you still working? This document is an HTML formatted version of a printed document. The term comment letters may refer either to the letters that individuals and entities submit in response to requests for public comment on SEC rule proposals or concept releases, or to correspondence between SEC staff and SEC filers. To help the SEC meet its responsibilities under the Sarbanes-Oxley Act, the SECs Division of Corporation Finance (the Division) continues to selectively review documents filed by registrants under the Securities Act of 1933 and the Securities Exchange Act of 1934. John is a senior consultation partner in the SEC services team in Deloitte & Touche LLPs National Office Accounting & Reporting Services group and is a member of the Consolidations team. Of these, 90% resulted in changes in income of 10% or more. The tone in 2020 has not changed for both FINRA and SEC when it comes to noncompliance. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. However, the issuer may also request consideration of a question by more senior Division staff. It also highlights areas the SEC staff may focus on next and summarizes best practices that may help companies respond to SEC staff comment letters. 3 The supporting objective is relatively unimportant and its general implementation should not be a high priority at the Commission. Please see www.pwc.com/structure for further details. Management Review Periodically test the systems to ensure the communications are being captured for review and retention. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Some staff mentioned a perceived lack of promotion opportunity (especially to GS-14), as well as a lack of bonuses and other rewards. Most of the participants also indicated that they felt a strong sense of responsibility to the investing public and a desire to live up to the Division's, as well as the Commission's, expectations. On September 22, 2021, in a step that emphasizes the SEC's increased focus on climate change disclosure, the SEC's Division of Corporation Finance ("Corp Fin") issued a sample letter for public companies containing comments illustrative of those that it may issue to companies "regarding their climate-related disclosure or the . The twenty comment letters we reviewed appeared to be prepared in accordance with Division operating procedures. In addition, they described a "collegial" atmosphere. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. Nave Bayesian classification identifies comment letters associated with future restatements and write-downs. Bell entered into a consent judgment to settle a civil lawsuit brought by the Securities and Exchange Commission . The SEC continues to prioritize reviews of larger companies, with large, accelerated filers representing 61% of the reviews with comment letters in the current year even though they represented only 31% of the Forms 10-K filed. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. Audit Methodology The overall performance standards for professional staff include the staff performance measures for the comment letter process. One of the most significant risks was missing a major issue during a filing review. Review ourcookie policyfor more information. The Division works with the issuer to resolve the comments. Please reach out to, Effective dates of FASB standards - non PBEs, Business combinations and noncontrolling interests, Equity method investments and joint ventures, IFRS and US GAAP: Similarities and differences, Insurance contracts for insurance entities (post ASU 2018-12), Insurance contracts for insurance entities (pre ASU 2018-12), Investments in debt and equity securities (pre ASU 2016-13), Loans and investments (post ASU 2016-13 and ASC 326), Revenue from contracts with customers (ASC 606), Transfers and servicing of financial assets, Compliance and Disclosure Interpretations (C&DIs), Securities Act and Exchange act Industry Guides, Corporate Finance Disclosure Guidance Topics, Center for Audit Quality Meeting Highlights, Insurance contracts by insurance and reinsurance entities, explore the SEC comment letter trends in other sectors, Non-GAAP financial measures: 5 things you need to know podcast, Liabilities, payables and accrual estimates, {{favoriteList.country}} {{favoriteList.content}}. Quantitative Analysis "The military modernization in China in general, not just in the maritime area, is one of the fastest we've seen in human history, [and] it goes well beyond what China needs for its defense . For instance, reviewers sometimes appeared inconsistent in their approaches. They thought the policy made it appear as if the foreign issuers were being "favored." inflation, and rising interest rates affecting markets worldwide over the past year. The rating scale used by the participants ranged from 7 (full implementation) to 1 (not being implemented in a meaningful manner). If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. Securities Exchange Act of 1934. On the Radar: SEC Comment Letter Considerations Including Industry Insights, Partner | National Office Accounting & Reporting Services, +++ DO NOT USE THIS FRAGMENT WITHOUT EXPLICIT APPROVAL FROM THE CREATIVE proactive guidance as needed and to conduct ongoing reviews and oversight to protect The number of filings reviewed measures the amount of work performed by the review staff, but does not gauge the effect of the comments on filing disclosures as well as outcome-based measures. The Division should use more outcome-based program performance measures to gauge the success of the comment letter process. Management and auditors discussed a number of examples of possible objectives in several joint meetings. 22 percent of the Forms 10-K filed. We summarized the comments on flip charts. The Office will also use this information in its risk assessments, used to select future audits. Focus Areas Relating to Investment Advisers, Investment Companies, Broker-Dealers, and Municipal Advisors OCIE will continue its risk-based examinations for each type of these registered entities. Addressing SEC comment letters can be an arduous process. A major goal of the audit was to maximize the value of the audit to management, while maintaining auditor independence. Our SEC Reporting Update publication highlights key trends in SEC staff comment letters issued during the year ended 30 June 2020, including comments on accounting and disclosures related to the COVID-19 pandemic, the use of non-GAAP measures, management's discussion and analysis and revenue recognition. FINRA 2020 Exam PrioritiesThe Financial Industry Regulatory Authority (FINRA) has also released its 2020 priorities letter highlighting its areas of focus. It also highlights areas the SEC staff may . In addition, during the current year, approximately 50 Read our best practices here. The issuers we contacted indicated that their experiences with the Division were generally positive. Program Performance Measures 2022 Regulatory Roundup: Record-Breaking Penalties Provide a Glimpse Into 2023, Smarsh Advance Recap: Voice The Newest Frontier in Supervision, More Wall Street Sweeps Focus on Off-channel Communications, Our Top 5 Digital Communication Predictions for 2023. All stakeholders performance standards for professional staff include the staff accountant and examiner some! Released its 2020 priorities letter highlighting its areas of focus relatively unimportant and its implementation. Which is a global leader in assurance, consulting, strategy and transactions, and should not be a priority! Letters can be an arduous process issuers were being `` favored. changes in income of 10 % more! The policy made it appear as if the foreign issuers were being `` favored. of flexibility in hours. 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